Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P x . Assume that P = $8, I = 200, and P x = $10.
-Given the above equation, the price elasticity of demand for noodles is _____.
A)4
B)0.5
C)2
D)2.5
E)1.6

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. In this case, the quantity demanded is given by the equation Q = 20 - 4P + 0.2I - 2PS1U1B1xS1U1B0. If the price increases by 1%, the quantity demanded will decrease by 4%. Therefore, the price elasticity of demand is -4%.

Scenario 5.1 The Demand for Noodles Is Given by the Following Equation